Turkey's tottering political system edged further towards breakdown yesterday as police arrested 24 people suspected of plotting to overthrow the government hours before a prosecutor went before the country's highest court demanding the dissolution of the ruling party.

Two retired generals and a newspaper columnist were among those detained as investigators widened an investigation into an alleged coup attempt against the Justice and Development party (AKP) government by a secular-nationalist cabal.

The timing of the arrests drew attention away from the official opening of a case brought by the chief prosecutor, Abdurrahman Yalcinkaya, to close the AKP and ban its senior figures from politics for allegedly trying to turn Turkey into an Islamic state.

The bewildering chain of events prompted a crisis of confidence in the financial markets, with shares on the Istanbul stock market plunging 6% and the local currency, the lira, falling by 2%.

In a 90-minute oral submission, Yalcinkaya told the constitutional court that the AKP was systematically trying to undermine the 85-year-old political system bequeathed to Turkey by Mustafa Kemal Ataturk.

Besides the AKP's closure, he is seeking to have its senior figures, including the prime minister, Recep Tayyip Erdogan, banned from politics for five years. The AKP, which has roots in political Islam but denies the charges against it, will submit its counter-arguments tomorrow.

The case is the latest stage in a bitter power struggle between the secular establishment - represented by the judiciary and the powerful military - and religious conservatives. Many analysts believe the court will rule in favour of the AKP's closure, leaving a vacuum at the heart of Turkish politics.

The AKP, which has governed since 2002 and was re-elected last year with 47% of the vote, accuses its adversaries of trying to mount a judicial coup.

But that allegation was overshadowed by the more sinister accusations that prompted yesterday's arrests. They were the latest development in an investigation into Ergenekon, a group of secularists said to have been planning bombings and assassinations allegedly designed to prompt a military takeover.